English, Article, Journal or magazine article edition: An Interest Rate Peg Might Be Better than You Think Andreas Schabert; Markus Hörmann

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Bookmark: http://trove.nla.gov.au/version/5487
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • An Interest Rate Peg Might Be Better than You Think
Author
  • Andreas Schabert
  • Markus Hörmann
Physical Description
  • preprint
Notes
  • Active interest rate policy is frequently recommended based on its merits in reducing macroeconomic volatility and being a simple and transparent policy device. In a standard NewKeynesian model,we show that an even simpler policy, namely an interest rate peg, can be welfare enhancing:The minimum state variable solution and an autoregessive solution under a peg can lead to lower welfare losses than the unique solution under an active interest rate rule. Given that a peg is usually blamed to facilitate endogenous fluctuations, we further show that a peg can be implemented in a way that ensures equilibrium determinacy.
  • Interest rate rules, welfare losses, equilibrium determinacy, fundamental solutions
  • RePEc:rwi:repape:0115
Language
  • English
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